Monday, February 28, 2011

OSK - Puncak Unlikely To Receive RM853 Million Compensation From Selangor Government

It is highly unlikely that the Selangor government will pay RM853 million in water tariff compensation to Puncak Niaga Holdings anytime soon, says OSK Research.

Due to the delay in receiving the water tariff compensation from the state government since 2009, the sum amounted to RM418.7 million in 2010.

Added to the sum payable of RM434.2 million in 2009, the company expected to receive RM853 million in cash from the Selangor govenment, OSK said.

"However, with regards to the strained relationship between Puncak and the Selangor government, we believe it is very unlikely," it said in a research note Friday.

The company commenced legal proceedings against the Selangor government for compensation amounting to RM471.6 million for the financial year 2010.

The company's pre-tax profit in the financial year ended Dec 31, 2010 fell to RM268.396 millionm from RM312.606 million chalked up in the same period a year ago, due to higher operating and finance costs incurred.

Revenue, however, rose to RM1.914 billion from RM1.887 billion previously due to higher water consumption.

OSK also revised downwards Puncak's target price to RM3.65 from RM3.85 previously and downgraded the stock to a "trading buy" from "buy" previously given the urgency and recent commitment by the Federal Government.

"We reckon a timeline for completion is still uncertain," it added.

Meanwhile, ECMLibra Investment Research maintained a "hold" call for Puncak but revised the earning estimates downwards to 11.6 per cent to account for higher interest expense.

"We roll forward our valuation to financial year 2011, thereby decreasing our target price from RM2.57 previously to RM2.16," ECMLibra said.- BERNAMA

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